This is the second part to the article New Jersey Equitable Distribution Part I, which explains how to identify marital property and options for distributing this property upon divorce. This article tells you more about the different kinds of marital property and gives specifics on how a court would divide retirement benefits and debt upon divorce.
Common Types of Marital Property
Generally, divorcing spouses think of the family home and income as property that they will have to split up. The scope of marital property is usually much broader, however. Marital property could include everything from musical instruments to silverware.
There is a rebuttable presumption that an item is marital property – meaning, the default classification is that the item belongs to the marriage, rather than to an individual – if either spouse acquired it during marriage. In some cases, you can overcome that presumption (and keep the property to yourself) by proving that you got the property before or after marriage, or that you bought it with your separate funds.
While the type and amount of property is unique to the marriage, marital property generally includes:
- your home, vacation homes, and all other real property such as business and investment properties
- cash, checking and savings accounts, and money market accounts
- certificates of deposit, savings bonds, stocks, and bonds
- partnership interests and business assets
- pensions, profit-sharing plans, stock options, and other retirement and employment benefits
- social security benefits
- debts
- household items like jewelry, clothing, collections, musical instruments, furniture, china, crystal, and silverware
- all vehicles, air- and watercraft
- life insurance, and
- lottery winnings – even when paid out after divorce.
This list gives a good idea of what could be divided at divorce, but it isn’t everything. To read more on what to include as marital property and how it differs from separate property, see the article New Jersey Divorce: Dividing Property.
Some items listed above are easier to divide than others. This is because it’s relatively simple to assign value to property like a house, a boat, or a savings account. Things get trickier with assets not yet realized, like unexercised stock options and pensions before retirement.
Equitable Distribution of Retirement Benefits
Retirement benefits earned by either spouse during marriage belong to both spouses. At divorce, they must be shared or offset. If you divorce before receiving those benefits, then a court can choose to divide them in one of two ways. The preferred method is to postpone division until the benefit matures (can be paid). That way, the value of the retirement benefit is known. Otherwise, the earner can keep the benefit while the other spouse gets to keep another asset of the same value.
Pensions, like other retirement and employment benefits, are a form of deferred compensation subject to equitable distribution at divorce. It doesn’t matter if the pension were contributory, non-contributory, vested or not; if the benefit was earned during marriage, it’s marital property. This is fair because both spouses expected to share these benefits when the earning spouse retired.
Once a court equitably distributes the pension, it will treat any amount kept by the spouse who earned the pension differently for purposes of spousal support (alimony) and child support. Pensions do not count as income for purposes of spousal support. They do count, however, towards a parent’s financial ability to provide child support. To read more about the types of alimony and factors used to establish an amount, read Understanding and Calculating Alimony in New Jersey.
Equitable Distribution of Debt
Debts, just like assets, are subject to equitable distribution. Although you might know how much debt you carry at divorce – like the amount of the mortgage on the family home, how much you owe on a car, a credit card, or taxes – there could be some surprises. For the most part, both spouses are responsible for the debt either spouse acquires during marriage.
This means that if your spouse runs up the balance on a credit card during your marriage and defaults on payment, the creditor can go after both of your financial resources for the amount of debt acquired during marriage, even if the line of credit is under the debtor spouse’s name alone. In this case, however, the creditor should try to recoup the amount from the debtor spouse’s resources first. Marital assets would cover any remainder.
Even where your debts are in good standing, one or both of you will remain responsible for them at divorce. To allocate debt fairly between spouses, a court will first rely on information from both of you to determine how much debt is marital property and what amount could be separate. Then, the court subtracts the amount of marital debt from the marital assets before distributing the assets. Your separate debt – let’s say you have student loans – remains your responsibility alone, but a court will take that liability into consideration as part of your economic circumstance when deciding on a fair distribution of assets.
There are some situations where it would not be fair to hold both of you responsible for the debts of one. If your spouse purposefully squanders your marital assets – for example, spends the marital savings on a luxury car to get back at you for wanting to end the marriage – a court could hold this spouse responsible, alone, for making car payments.
Resources
New Jersey Statutes Annotated 2A:34-23.
